The firm recommends selling conventional 30-year 6.0% passthroughs and buying duration-weighted 15-year 5.5% passthroughs. Recent technical strength in the 6.0% roll has made the coupon rich versus 15-year 5.5%. The firm believes that the strength in 6.0% will be difficult to sustain in the face of recent fast prepayment speeds on that coupon. In particular, the firm believes that in an uptrade, the 6.0 coupon may repeat its poor performance of early March. For investors who don't roll, 15-yr 5.5% have better current yield, shorter duration and arguably better convexity.
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